La Sociedad de Tasación Reports New Build Price Drop
The average price of newly built property in Spain's regional capitals fell by 1.2% in the first 6 months of the year, the first time this has happened in 15 years, according to the latest report from La Sociedad de Tasación, Spain’s largest appraisal company.
The report shows that new build property prices fell in 35 of Spain’s provincial capitals, but rose in 11, though by less than the general inflation rate. As a result, the average price of newly built property in Spain’s cities fell by 1.2% to 2,781 Euros per square metre at the end of June. During the same period last year, new build prices rose by an average of 4%. This is the first time that new build prices published by La Sociedad de Tasación have fallen since the recession of 1992 and 1993, when prices fell 1.5% and 0.2% respectively.
Real Estate Marketing Discount Study
A new study by the consultancy Real Estate Marketing (REM) reveals that 6 out of 10 Spanish developers are now offering discounts to buyers in an effort to make sales. When indirect discounts are included 71% of developers are offering buyers improved terms. 41% of the developers surveyed by REM reported that discounts of between 10% and 20% delivered the best results, compared to 18% favouring discounts of up to 10%, and 11% offering discounts of 20% to 30%. Only 5% of the developers surveyed were willing at this point to consider discounts of more than 30%.
DBK Coastal Property Study
A third of all new developments on the Spanish coast have been on the market for more than 3 years, according to a new study from the consultancy DBK. The company looked at 326 new developments for sale on the coasts of Catalonia, The Valencian Community, Murcia, Andalucia, The Balearics, and The Canaries. 34% of these new developments have been on sale for more than 3 years.
The report reveals that almost half of the projects studied are now selling ‘key in hand’, compared to less than 10% three years ago, when off-plan sales were the norm. DBK forecast that sales of newly built properties on the Spanish coast will fall by 15% a year for the next 2 years. That translates into 90,000 properties sold in 2008, and 76,500 in 2009.
This continues a trend that was already underway in 2007, when sales of holiday homes on the Spanish coast fell 4%, according to the report. Last year’s sales performance varied considerably by region, with sales falling by more than 20% in Catalonia, The Canaries, and The Balearics, but rising by 22% in Andalucia, and 14.5% in Murcia.
The report warns that the stock of unsold new properties on the Spanish coast is growing, estimating that it swelled by 315,000 properties between 2004 and 2007. It also warns that the market situation is deteriorating due to falling buyer confidence, rising interest rates, rising mortgage delinquencies, the credit crunch, and a rising Euro that is pricing British buyers out of the market.
Housing Starts and Planning Permission
As is well known, the number of new homes being built in Spain has slowed dramatically this year in response to falling demand, and a glut of new properties on the market. Planning approvals in the first four months of the year fell 56% compared last year (from 276,588 to 120,680), according to new figures from the Ministry of Development. The number of planning approvals started falling last July, when they had reached an annualised rate of more than 700,000 per year. If the trend continues, there will be fewer than 350,000 planning approvals this year.
Housing starts are holding up slightly better than planning approvals. According to the Ministry of Housing, housing starts fell 36% in the first quarter (to 108,275) says the Ministry of Housing. Over the 12 months to the end of March there were 484,199 housing starts, 26% less than the previous 12 months.
Housing starts for government subsidised social housing were down 58% in the first quarter, despite government plans to use an increase in social housing to cushion the fall in the construction sector.
Whilst housing starts have been plunging, the number of new build properties completed has been rising. Not including social housing, 165,698 new properties were completed in the first quarter of the year, 23% more than the same time last year. Over 12 months 610,349 properties have been finished, an increase of 3.4% over the previous 12 months.
The Housing Ministry has also revealed that 423,000 new households were created in 2007, of which 80% are owner-occupiers, and 20% renting.
By the end of 2007, there were 24.5 million properties in Spain, an increase of 2.7% over 2006. 16.77 million properties, or 68.5% of the total stock, are used as primary homes.
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Edward Hugh is only able to update this blog from time to time, but he does run a lively Twitter account with plenty of Spain related comment. He also maintains a collection of constantly updated Spain charts with short updates on a Storify dedicated page Spain's Economic Recovery - Glass Half Full or Glass Half Empty?